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Congress Finally Acts FAST on America’s Infrastructure

On Friday, December 4th, a decade-long congressional standoff on federal transportation funding came to an end with the signing of Fixing America’s Surface Transportation (FAST) Act by President Obama. The landmark legislation allocates $305 billion dollars to America’s multimodal transportation network over the next five years, a marked change from the short-term one to two year authorizations that have hobbled federal infrastructure spending since 2005.

Shippers and importers will see a direct impact not only in the $205 billion allocated to America’s highway network, but also in the form of freight-specific competitive grant programs, such as the Nationally Significant Freight and Highway Projects Program, which received $4.5 billion over five years to assist in prioritizing commerce transportation projects. Additionally, shippers will see the return of the Export-Import Bank, whose charter Congress rejected to extend last summer, as well as expanded authorization for the Department of Transportation to collect data on cargo handling at U.S. ports with the intention of greater standardization.

The FAST Act is undoubtedly progress for U.S. transportation policy, a rare glimmer of bipartisanship in a melodrama that has only grown as the country’s 50-year-old highway network continued to approach the end of its engineered lifespan, but it would be overly optimistic to consider the legislation a resolution to America’s transportation infrastructure woes.

Cracks begin to show, no pun intended, when the foundational revenue stream used to bolster the transportation fund, the gas tax, is evaluated. The federal gas tax, not to be mistaken with the gas taxes levied by states to fund their roads and infrastructure, has not increased from its $0.183/gallon level since 1993. Much like the Beanie Baby craze birthed in that same year, the federal gas tax has not aged well. Americans have traded in their Chevy Tahoes for Toyota Prius, and overall efficiency has increased, a boom from an environmental perspective, but problematic from a funding perspective. When coupled with a drop in vehicle miles traveled (VMT) and steady inflation, the reality of American highway funding is that we have dwindling funds to pay for increasingly more expensive expansion and maintenance projects. Annual federal transportation expenditures currently average around $50 billion, but gas tax funding generates $34 billion in revenues.

Even more concerning, the backlog of transportation infrastructure projects that require funding is growing. In the American Society of Civil Engineer’s (ASCE) latest Report Card for America’s Infrastructure for 2013, the organization gave American infrastructure a terrible D+ overall rating, with a D rating for roads and marginally better C and C+ ratings for ports and railways respectively. The cost of meeting these infrastructure needs could be enormous. One independent analysis of the ASCE policy proposals suggested that the gas tax would need to quadruple from $0.184/gallon to $0.777/gallon.

The FAST Act’s response to these funding issues is paltry at best. No adjustments will be made to the federal gas tax through 2020 and funding is dependent upon one-time capital infusions from oil sales out of the Strategic Reserve, drawing down funds and cutting bank dividends from the Federal Reserves.

How can transportation infrastructure be sustainably funded beyond 2020 if the gas tax is no longer seen as a politically viable option? One solution could come from a pilot program reauthorized in the FAST Act itself, which empowers three states—Missouri, North Carolina, and Virginia—to toll existing interstates to generate revenues. The program gives these states a three-year deadline for implementation, or else permission can be passed to another state, and signals a change in attitudes on interstate tolling, perhaps driven by the success of e-tolling programs like E-Z Pass. Evidence of this trend can also be seen at the state level. States such as Florida have started to rely more on toll roads and tolled express lanes to offset the costs of expansion and maintenance.

What is the impact for shippers and importers? This shift from broad-based fees for all drivers to more targeted user fees for interstate users will directly impact the cost of drayage. While the industry has been relatively shielded from the costs of America’s transportation infrastructure, by long-haul truckers and their customers, will see their costs increase significantly. As importers’ landed costs increase, the medium to long-term impact could be a shift in distribution models, with greater reliance on models favoring lower-cost local trucking and locations with multimodal logistics options to allow for a multiplicity of logistics solutions. In other words, distribution centers relying entirely on interstates in a tolled interstate future could see their competitive cost advantage dry up, and higher-cost and more accessible locations becoming more attractive.

Luckily for importers and shippers, widespread interstate tolling is still very much a nascent concept. Special interest groups, like the Alliance for Toll-Free Interstates, lobbied hard this year to prevent the Obama administration’s original proposal for nation-wide interstate tolling from making its way into the FAST Act, but with aging transportation infrastructure dragging down the economy and gas tax revenues failing to keep up with inflation, it is likely that the fight against interstate tolling will be much more difficult in 2020.

-- Devin TurnerSenior Global Logistics Specialist

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Comments

Angela C.

Great blog, Devin! You mentioned the requirement regarding DOT data collection initiatives. I think that’s a particularly exciting element of this legislation. Having published data based on standard metrics for the top 25 ports in the nation will provide wonderful transparency to port operations. With so many issues related to “port congestion”, the requirement of standard metrics outlining berth & yard productivity as well as domestic trucking and rail elements will add nice, standardized specifics.

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